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Why Groupon Threatens Google's Contextual Discovery Plans

Anyone who may have knit their eyebrows over Google's $6 billion offer to buy Groupon should read Business Week's fine profile on the company from March 17.
The piece, which is longish, opens with Groupon CEO Andrew Mason testing a new service from his iPhone called Groupon Now that

The piece, which is longish, opens with Groupon CEO Andrew Mason testing a new service from his iPhone called Groupon Now that lets users tap a button for I'm Bored or I'm Hungry to see lists of activities or restaurants where Groupon's trademark local deals are being currently offered.

Today's Groupon lets you buy into a deal and wait some time for the deal to kick in -- could be a few hours, could be 24 hours before you got that confirmation e-mail that your deal is ready for claiming. Groupon Now returns options for instant deals users can use immediately. Hence the name.

Mason clicked the "hungry" button, and the app on his phone signaled his location to Groupon's servers and then surfaced deals from nearby restaurants whose discounts were good only during select hours on that particular day.

Further reading

"And that, Mason declares as he taps his phone and purchases $8 of savings from Thalia Spice, could turn Groupon into a combination Yellow Pages, Valpak coupon packet, and price-conscious concierge for millions of consumers. "People could end up being driven to eat by what they find on Groupon and when they find it," he beams."

Google will tell you this is a form of contextual discovery, but the search engine aims to be more proactive than that.

Instead of Google grabbing Groupon's great local commerce generating paradigm and rolling it up with user preference data to offer deals, Groupon has moved a step closer into Google's turf by bringing users discounts much faster.

As Groupon's investor and adviser Harry Weller noted: "It makes Google's market look quite small if we get it right. It's really tapping into the largest part of commerce in the U.S.--local."

Let's explore this point further. If Groupon wanted to, it could also build an alerting system to shuttle relevant deals to users' phones based on their preferences -- akin to the sort of contextual discovery service Google envisions. Groupon would simply leverage its existing data for customer preferences.

Groupon already has the commerce engine and the customer data. Google just has the user data, putting it at a disadvantage to the company it tried to buy, at least for the time being.

How long before Google buys LivingSocial, Gilt or some other local deal operator to get the deal/offer engine and customer data? Without those ingredients, Google has a lot of user preference data but no service vehicle to leverage it.

We have no indication Google Offers will provide a Groupon Now-type service. Should be fun to watch this year as Google's contextual discovery plans evolve.

The company will have to make some serious build or buy decisions if it wants to head off Groupon's crazy comet tail.